The proposed definition compels the auditor to make a personal assessment of his or her objectivityto determine if pressures and other factors compromise the ability to make unbiased audit decisions. These developments have enhanced and reinforced the role and responsibilities of internal audit in risk. If the auditor is independent in a mental attitude, the audit quality will have added value. Some recent empirical markets based research provides limited support for this finding. Existing literatures mainly revealed four threats to auditor independence, which are client importance, nonaudit services nas. In theory, there are many factors that affect independence of an auditor and these factors which have been studied can be. Results reveal that the effectiveness of internal auditing is influenced by. A theoretical examination of the role of auditing and the. Purposeauditor independence is fundamental to public confidence in financial reporting and the auditing profession. Factors affecting the performance of the internal audit function in government ministries in kenya by kirima n njoroge a research project submitted to the chandaria school of business in partial fulfillment of the requirement for the degree of masters in business administration mba united states international university. Analyzed data were presented in form of tables and graphs and make conclusions and recommendations based on the findings of the study. The independence of an auditor guarantees objectivity and imposes trust and confidence in the users of the financial statements. Audit tenure is the length of time the auditor has conducted an examination of a company. The external auditor is independent auditor and play key role in evaluation of evidences, and is essential to the provision of an objective opinion on the truth and.
Based on previous literature, the auditors independence can be affected by several factors. Wallace 1980, 1987 and 2004 brings forward many factors implying that. Factors affecting the independence of the external auditor. Loan officers formed the sample as they are relatively sophisticated financial statement users who. Oct 01, 2005 purposeauditor independence is fundamental to public confidence in financial reporting and the auditing profession. Auditor independence is important because it has an impact on audit quality. The perceptions of financial analysts find, read and cite all the research you need. Concerns are often expressed by regulators and other observers as to whether auditors are sufficiently independent and competent.
Factors affecting the internal audit effectiveness in. Reject 4 the reputation of the auditing office doesn. This research considers the following audit quality factors. A handful of these threats to auditors independence will be mentioned in this paper as well as measurements to reduce the effects of these threats. The results show that there are nine over eleven factors having positive influence on audit quality, say. Pdf on jan 1, 2015, omri mohamed ali and others published factors affecting auditor independence in tunisia. Similarly, the auditors and the management are now mandated to issue internal control reports, which again increases and strengthens the monitoring role of the auditor over the management. Professional attitude, experience and industry expertise, auditors independence, audit process and quality control, auditor qualification, audit time, law system, auditees characteristics, and audit market. The first, affecting the organizational independence of the internal audit function, is its relationship with the audit committee. The aim of this research is to assess the relationship between the presumed ai influencing factors and ai from the standpoint of auditors in bahrain.
In addition to the auditors independence, other individual specifications such as professional competence, specialized knowledge, liability and expertise of the auditor are important factors influencing the quality of auditor professional judgment, and hence, audit quality. There is a statistically significant relationship between the factors affecting the quality of the audit the audit team, the reputation of the audit firm, the independence of the audit team members and the audit company and the auditor s quality of audit performance. The quality is then dependent on the probability that the auditor will both. Purpose auditor independence is fundamental to public confidence in financial reporting and the auditing profession. Factors affecting the quality of auditing in banks the report, which is prepared by the auditor, is important for several parties, and to. Deangelos 1981 which expresses the quality in terms of the auditors competence and independence. A framework for research in auditor independence and audit quality. Factors affecting internal audit independence a case study of.
The study established that the auditors independence was influenced by the four selected factors audit firm size, audit firm tenure. Factors associated with internal audit effectiveness. On the basis of the above, the following hypothesis is proposed. First, in response to anecdotal evidence that a lack of audit independence contributed to corporate failures, many countries adopted regulation that prescribed auditor rotation. A framework for auditor independence journal of accountancy. Auditors independence is a generally accepted theory that assumes that an auditor internal or external needs an immunity to enable him to form an independent opinion okike, 2004. Jul 04, 2015 european journal of business and management issn 22221905 paper issn 22222839 online vol. Auditing is ensuring the accuracy and integrity of information and business process. Easily share your publications and get them in front of issuus. The first study examines the effects of auditing students cognitive moral development. Originalityvaluethe paper provides important insights into the factors affecting auditor independence and contributes towards better understanding on the ways to improve the confidence in financial reporting and credibility of the auditing profession.
Audit committees and client financial condition did not affect perceptions of auditor independence. Pdf factors affecting the independence of external. The impact of extended audit tenure on audit independence, unpublished masters thesis, umea school of business, greece. Issuu is a digital publishing platform that makes it simple to publish magazines, catalogs, newspapers, books, and more online. Factors affecting the effectiveness of internal audit in the.
A qualitative study approach was adopted by the current study with a total sample size of 40. Our study examines the impact of 49 independence enhancing and threatening factors on the perceptions of 54 financial analysts using a questionnaire instrument. Researchers have continuously identified and assessed several factors that are expected to safeguard ai and objectivity to mitigate the potential threats faced by the audit profession worldwide. This study examines the effects of audit committees, client financial condition, management advisory services, competition and audit firm size on new zealand bankers. Chiaah and karlsson 2010, states that independence can be of two forms. Bankers perceptions of factors affecting auditor independence. A survey conducted by alizadeh 2011 has shown that the organizational independence of the iaf is among the five important factors of the effectiveness of ia in iranian companies. Researchers have continuously identified and assessed several factors that are expected to safeguard.
There is a statistically significant relationship between the factors affecting the quality of the audit the audit team, the reputation of the audit firm, the independence of the audit team members and the audit company and the auditors quality of audit performance. The purpose of this paper is to explore the perceptions of tunisian financial analysts regarding factors influencing auditor independence. The quality is then dependent on the probability that the auditor will both discover a breach and report that breach. Deangelo1981 argued that a large auditor has these two characteristics as the auditor has more technological capabilities and more reputation to lose. Factors affecting the performance of internal auditors in southeast sulawesi, indonesia. Factors affecting the performance of the internal audit function in government ministries in kenya by kirima n njoroge a research project submitted to the chandaria school of business in partial fulfillment of the requirement for the degree of masters in business administration mba united states international university africa spring 2016. Audit firm size appears to be the most important factor that affects the auditor independence, followed by tenure, competition, audit committee, audit firms providing managerial advisory services and size of audit fee. The definition offers two important factors of audit quality, which are the auditors capacities in conducting an audit and the independence of the auditor over the client. Dec 29, 2016 the aim of this research is to assess the relationship between the presumed ai influencing factors and ai from the standpoint of auditors in bahrain. The importance of an auditors independency has been further emphasized by the vast amount of policies mandated by the pcaob and the securities and exchange committee sec. It shows the basic factors related to auditor independence threats, their causes and effects on audit quality.
Factors affecting the performance of internal auditors in. Presentation on the factors affecting auditor independence. However, the results conflict with studies conducted by sundgren and tobias 2011 which state the audit fee has a negative impact on audit quality. Factors affecting the quality of external auditing services fedaa abd almajid sabbar alaraji. Three studies of auditor independence duane michael brandon abstract this dissertation investigates auditor independence by examining the effects of various factors on independence, both in fact and as perceived by several distinct groups. Factors affecting the performance of the internal audit. The independence of an auditor guarantees objectivity and imposes trust and. The results indicate that the principal threat factors relate to non. Auditor attitudes have a positive and significant impact on the performance of internal auditors.
The internal auditor questionnaire covered the factors investigated with respect to association with perceived iae independent variables. The study focused on the factors affecting internal auditors performance in public universities in kenya. The second is the use of the function as a management training ground. Further, in some instances, impaired auditor independence perceptions can affect user decisions based on the financial statements, such as investment and loan decisions lowe et al. A survey conducted by alizadeh 2011 has shown that the organizational independence of the iaf is among the five important factors. Auditors and clients in different levels and firms are likely. This important issue has constantly been raised by the media. The study aims to provide further understanding of the factors influencing auditor independence from the perspective of commercial loan officers. The auditor independence is measured by how honest an auditor is in reporting the material misstatements found in the financial statements by managers. Pdf factors affecting auditor independence in tunisia. This study examines two factors that may influence the independence and objectivity of internal audit. Auditor independence has long been seen as a key driver of the auditor role. Factors affecting the effectiveness of internal audit in. Factors affecting the internal audit effectiveness.
Pdf factors affecting the independence of external auditors. The results also reveal that independence of internal audit is the foundation of internal audit effectiveness. Further, independence is defined as more than just compliance with the independence rules. A higher perception of internal audit effectiveness will be related to greater management support for internal auditing. Influence of auditor independence, audit tenure, and audit. The emerald research register for this journal is available. Two factors affecting internal audit independence and.
Factors affecting the quality of the external auditing, masters thesis, gaza university, 14. The actual independence is the key to the auditors ability to overcome personal biases, and provide objective judgment and transparent reports church et al. The impairment or lack of external auditor independence is a main cause of many corporate collapses and corporate scandals across the world. Factors affecting the quality of external auditing services. Introduction independent audit of company financial statements is a key component of the regulatory framework which supports capital markets.
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